GR 161319; (January, 2007) (Digest)
G.R. No. 161319 ; January 23, 2007
SPS. EDGAR AND DINAH OMENGAN, Petitioners, vs. PHILIPPINE NATIONAL BANK, HENRY M. MONTALVO AND MANUEL S. ACIERTO, Respondents.
FACTS
Petitioners-spouses Edgar and Dinah Omengan were granted a P3 million revolving credit line by respondent Philippine National Bank (PNB), secured by two residential lots registered solely in their names. PNB released P2.5 million but withheld the final P500,000 upon receiving a letter from Edgar’s sisters claiming the mortgaged property was co-owned by all siblings and that Edgar was violating a prior family arrangement. The remaining P500,000 was later released by a new branch manager, who also recommended a P2 million increase in the credit line to P5 million.
PNB’s credit committee approved the P2 million increase on the condition that petitioners secure the conformity of Edgar’s sisters regarding the collateral. Petitioners failed to obtain this consent. Consequently, PNB withheld the release of the additional P2 million. Petitioners then filed a complaint for breach of contract and damages, arguing that this condition was unilaterally added and not part of their original agreement. The Regional Trial Court ruled in favor of the petitioners, ordering PNB to release the P2 million and pay damages.
ISSUE
Whether respondent PNB committed a breach of contract warranting the release of the additional P2 million loan and an award of damages.
RULING
The Supreme Court ruled that PNB did not commit any breach of contract. A breach of contract is the failure, without legal excuse, to perform a contractual promise. Here, the original P3 million credit line was fully released to petitioners. The additional P2 million was a new loan application, not part of the perfected original contract. The conditional approval by PNB’s credit committee, requiring consent from Edgar’s sisters due to the co-ownership claim, constituted a counter-offer. Petitioners never accepted this condition; thus, no meeting of the minds occurred, and no contract over the increase was perfected. Consequently, PNB had no obligation to release the additional amount.
Furthermore, PNB acted with the diligence required of a bank. While a mortgagee may generally rely on a certificate of title, banks are held to a higher standard of care due to the public interest inherent in their business. Upon receiving the sisters’ letter, PNB had reasonable grounds to investigate the property’s ownership before approving a new, larger loan. Petitioners offered only bare denials against the co-ownership claim. PNB’s prudence in imposing the condition was justified. Since there was no breach of contract and PNB exercised due diligence, it cannot be held liable for damages. The Court of Appeals decision was affirmed.